Gerard Gibert on Mississippi Lottery

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Thu, 12/27/2018 - 12:00pm

Gerard Gibert, a resident of Ridgeland, was recently named to the Mississippi lottery board of directors. He earned his bachelor’s degree in accounting with a minor in economics from the University of Mississippi. He is the CEO of Venture Technology. Gibert recently spoke with Sun reporter Nikki Rowell about the Mississippi lottery.

How did you get involved with the Mississippi lottery board?

“By law, the Governor has the ability to appoint members to the five-member board. Each member of that board is assigned a term to serve one to five years. I was asked to take the four-year term. That board ultimately has to be approved by the state Senate. That board is appointed at the discretion of the Governor.”

What is your role on the board?

“I am the vice-chairman of the board.”

What is the role of the board in getting the lottery up and running?

“The lottery is a private corporation. It’s the Mississippi Lottery Corporation as established by the law. Again, the board of directors is appointed by the Governor. So, it’s sort of a quasi-governmental organization. The corporation is charged with setting up the lottery. The board is charged with building the organization that will ultimately operate the lottery in accordance with the law. So, it is a private company essentially. It will have a private staff. It will have vendors. It will have partners. The corporation’s job will be to operate the lottery again as specified by the law. So, the corporation, in general, is a private company whose job is to run the lottery as specified by the lottery law.”

Who will be overseeing the lottery?

“This board has purview over the lottery’s operations, and the board will be responsible for all the tasks that a typical board would in operating a private company. So, that involves, the first step for us, which we will be discussing at our second board meeting, will be to discuss the process for engaging legal services and a law partner to guide us and to ensure that we are operating in accordance with all laws, frankly. The next thing we will do is start searching for a chief executive of the lottery corporation. That likely will be someone who brings lottery experience. Could be from another state. Could be from within the state. But someone who understands lottery process and lottery business model. Then we will start assembling a staff around that chief executive in various roles, such as finance and operations, administration, vendor relations. Then we will start interviewing and vetting vendors. Those would be the companies that provide the various lottery games and lottery services. There’s not that many in the United States.”

How much money is the lottery projected to bring in?

“We’ve used Arkansas as kind of a template for what we think would be a similar size and scope to Mississippi’s lottery. We think that we can get to the $150 to $250 million mark. I know that’s a wide range, but it could vary from year to year. Revenue size and scale could produce $80 to $110 million in net proceeds. So, the way that works is that from that revenue, we have to pay expenses to operate the lottery corporation and we have to pay the winnings out of that revenue. So, what’s left over would be that net proceeds and the net proceeds would then be transferred over to the state in accordance with the law and would be deposited in the state highway fund. The state treasurer, Lynn Finch, is an ex officio member of our board. Meaning she participates in the board meetings and proceedings but does not have a vote.”

How long will it take to get everything in order?

“Our expectation at this point is that we should be in a position to offer the instant tickets, what are commonly known as scratch-offs, to offer that in late summer 2019. Our hope is that the drawdown games, the Mega Millions and Powerball games, be in place by fourth quarter 2019. Hopefully, no later than first quarter 2020. There’s a fair amount of additional work that goes into implementing those games in production because you have to be part of the alliance of states. That’s how the jackpots get so large and the opportunity gets so big.”

How often will the board meet?

“In accordance with the law, we must meet, at a minimum, once a month for the first 18 months. After that, it’s at the discretion of the board how often we meet. My guess is that we will exceed that minimum requirement for the first 18 months because there is just a lot of work that goes into the initial setup.”

Will all counties or cities have the opportunity to sell lottery tickets?

“I’m not aware that there is anything in the law that would enable a county or a municipality to opt out of the lottery. The tickets themselves are sold by qualifying retailers, and the law does stipulate what is required for a retailer to become associated with the lottery and have the ability to sell lottery tickets. This is where we will rely on our council, but the Governor’s office as well. In general, it will be sold by retailers, 2,000 to 2,500 retailers probably, across the state. The typical retailer is a convenience store, of course.”

What “products” will be available?

“This is where the board does have decision-making authority on what those games will look like. If you think about it as a private company, the concept is that this board will design the games themselves and the framework for that and the payout structure to maximize the profit of the company. It will be part of our job to work with our vendors and possibly consultants as well for the game structure and the payout ratios and mechanisms as well. In general, most lotteries across the states, the payout is about 55 percent of the revenue, the total net payout. We may have our own internal to the state drawdown games, in addition to participating in the Powerball and Mega Millions games. All of that is part of our job to figure that out.”

When will the state begin to see a profit from the lottery?

“Hopefully, as soon as we start selling tickets and producing revenue, the expectation is that revenue will obviously exceed our expenses and payout. As soon as we get these games into production, we expect to be producing income for the state.”

How will the funds be divided up?

“That is as prescribed by law. In the case of Mississippi, the first $80 million of net proceeds in a year goes to the state highway fund in accordance with the law. Anything over $80 million goes to the education enhancement fund. These are existing funds that are under the authority and control under the state legislature for how those funds are further allocated at the municipal level and so forth. That’s the model for the first 10 years. After the first 10 years of operations, the first $80 million is deposited into the state’s general fund and everything over that remains in the education enhancement fund. The real concept, the real driver for getting the lottery passed in Mississippi, was in fact to address infrastructure. The legislature was able to pass a fuel tax increase the last couple of sessions. This was an alternative.”

How will be the requirements for locations to sell tickets?

“These companies would have to have a clean background check, companies that are operating in good faith, have a stellar business reputation. It’s just the typical criteria you would expect. Again, our council will have to advise us on that. We don’t think we will have a problem finding qualified and willing retailers. Studies show that retailers that are in the business of selling lottery tickets, generally experience and enjoy a higher selling price per transaction, about 40 to 50 percent sometimes, than retailers and states that do not participate in the lottery.”